Saturday, September 18, 2010
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The Gold Report: David, not only do you write The Morgan Report, but you've written books about silver, invested in silver as a teenager and you hold a substantial amount of physical silver. What's with your fascination with silver?
David Morgan: My fascination really started as a teenager, particularly with the stock market and money. Once I started researching money, I found out that a stable monetary base usually requires the backing of precious metals. But that was just the beginning. What really got me motivated about the silver market was the first bull market that I was involved in through the 1970s into 1980. I wasn't that big a silver bull at that time. I was more of a gold bull, but silver outperformed gold at the end of the market cycle so substantially that I started to study silver more diligently. I wanted to know why.
The Hunt brothers were big investors in the silver market throughout the 1970s. Everyone explained the silver boom with "it's the Hunts," but I wanted to know why the Hunts put that much money into silver. Why didn't they buy gold? What fascinated the Hunts about the silver market? Once I dug deeper, there were significant factors outside the Hunt brothers that made silver a compelling study. (more)
Oil prices have fallen precipitously since the spring, as optimism about "green shoots" of economic growth gave way to fears of a double-dip recession. Prices have fallen more than 12% to $75.81 a barrel, from a high of $86.54 a barrel in April.
Indeed, with the U.S. economy stuck in the mire, the global outlook for oil demand has diminished - at least in the near-term. Longer-term, however, traders expect prices to surge higher next year as growth solidifies. That's why contracts for crude set to be delivered six months from now are worth more than crude at its current prices - an anomaly known as "contango." (more)
He provides the following chart to show the very long-term trend in stock prices. Prechter believes the current downtrend is simply the beginning of a much more dramatic move that mirrors past market declines. Based on this data the market is well overdue for a sizable correction:
“Not even Major League Baseball can rival the stock market’s wealth of statistical data. And after studying the relevant data and analyzing the long-term pattern, Prechter offered this conclusion in the May issue of The Elliott Wave Theorist: “The current bear market will be the biggest in nearly 300 years.“
Yes, Britain’s “South Sea Bubble” in the early 1720s was the last time a bear market was comparable to what we may see unfolding now — it’s represented by that vertical drop which you see on the chart.”
Commodities stocks, of course, are in the business of exploring for and producing raw materials. These resources are exceedingly important, indeed utterly indispensable for life and commerce. Even in this young Information Age, our entire physical world is built out of commodities. All physical movement is fueled by commodities. And despite new resource finds getting scarcer, world demand continues to grow relentlessly.
Commodities stocks’ profits are directly driven by commodities prices. The higher these resources’ prices travel, the greater the raw profits and margins for producing these products. And in the stock markets, the larger any company’s long-term profits the higher its stock price will be bid. So as the ironclad links of this causal chain show, it is commodities prices that ultimately drive commodities-stock prices. (more)
This is not typical of how the model usually works, but any mechanical model will eventually run into rough patches where peculiar price movement defeats them. This is one of those times, and as long as the 50-EMA keeps making these shallow cuts back and forth, our confidence in the signals will not be robust. (more)
* How to fix the Economy.
* Companies. Pabst: Blue-Collar Beer, Jet-Set Owners.
* Etc. The end of the office romance?
* Finance. No, really, this must be the market bottom.
* Plus. Lisa Falcone: Mrs. Hedge Fund. Netflix vs. Cable.
Lessons from Nokia's fall. Where coke is definitely not it.
The chipotle man's next move.